1 | Energy Efficiency and Renewable Energy eere.energy.gov
PowerSaver Loan Product INTRODUCTION Steve Dunn Project Manager, Residential Buildings April 17, 2014 U.S. Department of Energy
Building Technologies Office
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PowerSaver Partnership: Goals and Objectives
Goals for partnership between DOE and HUD: • Establish partnerships between approved PowerSaver lenders
existing home energy service providers or programs – Home Performance with ENERGY STAR – Home Energy Score – Better Buildings Residential Network
• Promote the PowerSaver loan product to program sponsors and partners – Utilize partnerships with lenders to increase the volume of PowerSaver
loans – Provide information resources, outreach, technical assistance and
support to participating program sponsors and partners
• Capture lessons learned, quantify and evaluate impacts, and make recommendations for HUD
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Webinar Objectives
• Provide an overview of the HUD Powersaver loan program
• Describe the role of financing in home energy efficiency projects and examples of program’s experience
• Learn how DOE program sponsors and partners can utilize Powersaver to offer affordable energy efficiency loans to homeowners
• Discuss options, strategies and next steps for interested programs to partner with participating HUD PowerSaver lender(s)
4 | Energy Efficiency and Renewable Energy eere.energy.gov
PowerSaver Loan Product A FHA Solution to Finance Home Energy Upgrades by HUD
Michael Freedberg Office of Sustainable Housing and Communities U.S. Department of Housing and Urban Development
Building Technologies Office
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FHA PowerSaver HOME ENERGY IMPROVEMENT LOAN PILOT PROGRAM
U.S. Department of Housing and Urban Development
April 17, 2014
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Home Energy Improvements
The need for affordable financing Helping homeowners make money-saving home energy
improvements is a top priority of the Administration.
Home energy improvements can save families hundreds of dollars a year -- while creating jobs and reducing pollution.
More home owners want to make home energy improvements, according to industry forecasts.
But a lack of affordable, available financing remains a major barrier for many consumers.
A market need exists for additional financing options.
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FHA Financing for Single Family Housing
Agency Financing Program
What it Does
HUD Energy Efficient Mortgage Program
Helps homebuyers or homeowners save money on utility bills by enabling them to finance the cost of improvements that will make their home more energy efficient
HUD PowerSaver 203(k) Purchase Rehab Program
Enables homebuyers or homeowners to finance the cost of home improvements when buying a home or refinancing an existing mortgage
HUD PowerSaver Home Improvement Loan Pilot Program
Enables homeowners to make cost effective, energy saving improvements to their homes. PowerSaver enables homeowners to borrow up to $25,000 through a second mortgage for terms as long as 20 years – up to $7,500 can be an unsecured consumer loan
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PowerSaver is a Pilot Program to Finance Home Energy Improvements
• PowerSaver is a mortgage insurance pilot program from the Federal Housing Administration (FHA) that enables homeowners to make cost effective, energy saving improvements to their homes.
• PowerSaver enables homeowners to borrow up to $25,000 for terms as
long as 20 years to make energy improvements of their choice. The 203k PowerSaver helps homeowners finance energy improvements when buying a house or refinancing an existing mortgage.
• Examples of eligible improvements include insulation, duct sealing,
energy efficient doors and windows, energy efficient HVAC systems and water heaters, solar panels and geothermal systems.
• Borrowers must have credit scores of at least 660 and total debt to
income ratios cannot exceed 45 percent. Loan to Value ratio’s can be capped at 100 percent of the property’s value.
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Three PowerSaver Products
I: PowerSaver Home Energy Upgrade – Unsecured Consumer Loan Up to $7,500 – Currently available in 4 states: ME, PA,KY, VA – Available by October in another 15 states
II: PowerSaver Energy Retrofit or Solar Loan
– Second mortgage up to $25,000 – Currently available in 27 states
III. PowerSaver 203k Purchase-Rehabilitation Mortgage
– First mortgage up to FHA loan limits ($217,500 to $625,500 in high cost areas)
– Currently available in 27 states
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PowerSaver I and II - Highlights
Loans amounts up to $25,000
Primarily a second mortgage program, but can be unsecured up to $7,500.
Loan terms as long as 15 years (20 for solar).
Interest rates vary, but currently range from 4.99 to 9.99 percent
Use of loan funds:
Minimum 75% of loan proceeds must be used for energy-saving improvements.
Remaining 25% of loan proceeds can be used for other non-energy improvements.
Appraisal may be but is not always required Lenders may choose to require an appraisal according to their investor
or risk requirements.
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A PowerSaver Solar Loan
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PowerSaver III - 203(k) Highlights
203(k) – Section of National Housing Act that authorizes FHA to insure loans for rehabilitating housing stock.
Under 203(k), borrowers can get an FHA mortgage for: Purchase or refinance of a home, plus Cost of rehabbing or improving the home.
First mortgage only. Becomes a “PowerSaver” loan when at least $3,500 of the
home improvement project includes energy efficient improvements.
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Eligible Uses of Grant Funds
Borrower Energy audit, if borrower desires Audit is not required Auditor must be accredited by HERS or BPI Auditor can be the contractor
Loan origination fee Property appraisal if lender requires Lender Program marketing expenses
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Key Features - 1
Attribute Eligible Loan Amount Maximum •Second mortgage up to $25,000 (unsecured up to
$7,500)
Loan Term •15-years (standard energy improvements) •20-years (renewable energy improvements)
Combined-Loan-to-Value •Not Required (Some lenders may still require)
Appraisal Type •Not Required (Some lenders may still require)
Property Types •Single Family detached •Attached dwellings •Condominiums Ineligible: •Co-operatives •Manufactured Homes
Number of Units •One
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Key Features - 2
Attribute Eligible Occupancy •Owner-occupied
Ineligible •Second Homes •Non-Owner-Occupied
Borrower Ownership • 50 % interest minimum
Decision Credit Score •660 minimum
Debt-to-Income Ratio •45% maximum (compensating factors allowed to offset)
Use of Proceeds •Measures that improve home’s energy performance (min 75% of loan proceeds) • Other Home Improvements (25% of proceeds)
Disbursement of Proceeds •50% maximum at closing •50% upon completion of the work
Discount Points •Third parties may pay and •Must be bona fide
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Key Features - 203(k)
Attribute Eligible
Property types 1-4 family dwelling Condominiums (1-unit only) Manufactured homes built after 1978 Mixed use business = square foot limits
for business apply. Properties must have been completed for
at least a period of 1 year.
Standard (k) Major Improvements Lender must use HUD 203(k) consultant Minimum repair - $5,000
Streamline (k) Minor Improvements Maximum improvement project -
$35,000 HUD 203(k) consultant is not required Improvements may not be structural
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Improvement Standards
Whole House Whole house air sealing measures, including interior and exterior measures, utilizing sealants, caulks, insulating foams, gaskets, weather-stripping, mastics, and other building materials in accordance with BPI standards or other procedures approved by the Secretary. (Reference: http://www.bpi.org/standards.aspx )
Insulation: Attic insulation measures that-- Attic (A) include sealing of air leakage between the attic and the conditioned space, in accordance with BPI standards or
the attic portions of the DOE or EPA thermal bypass checklist or other procedures approved by the Secretary; (B) add at least R-19 insulation to existing insulation; (C) result in at least R-38 insulation in DOE climate zones 1 through 4 and at least R-49 insulation in DOE climate
zones 5 through 8, including existing insulation, within the limits of structural capacity, except that a State, with the approval of the Secretary, may designate climate zone subregions as a function of varying elevation; and
Map Page: http://www.energystar.gov/index.cfm?c=home_sealing.hm_improvement_insulation_table
(D) cover at least-- (i) 100 percent of an accessible attic; or (ii) 75 percent of the total conditioned footprint of the house. (BPI Standards reference: http://www.bpi.org/standards.aspx ) Insulation: Wall insulation that-- Wall (A) is installed in accordance with BPI standards or other procedures approved by the Secretary;
(B) is to full-stud thickness or adds at least R-10 of continuous insulation; and (C) covers at least 75 percent of the total external wall area of the home. ( BPI Reference: http://www.bpi.org/standards.aspx ) Insulation: Crawl Space
Crawl space insulation or basement wall and rim joist insulation that is installed in accordance with BPI standards or other procedures approved by the Secretary and--
(A) covers at least 500 square feet of crawl space or basement wall and adds at least-- (i) R-19 of cavity insulation or R-15 of continuous insulation to existing crawl space insulation; or
(ii) R-13 of cavity insulation or R-10 of continuous insulation to basement walls; and (B) fully covers the rim joist with at least R-10 of new continuous or R-13 of cavity insulation.
(BPI Reference: http://www.bpi.org/standards.aspx ) Duct Sealing Duct sealing or replacement and sealing that-- (A) is installed in accordance with BPI standards or other procedures approved by the Secretary; and
(B) in the case of duct replacement and sealing, replaces and seals at least 50 percent of a distribution system of the home.
(BPI Reference: http://www.bpi.org/standards.aspx )
Eligible Improvements
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Improvement Standards Skylight Replacement Door or skylight replacement that meets most recent Energy Star specifications
Door Replacement Door or skylight replacement that meets most recent Energy Star specifications
Window Replacement
Replacement windows that meet: (A) most recent Energy Star specifications (good)
(B) meet specifications of Department of Energy High Performance Windows Volume Purchase Program (better - more efficient)
Reference: http://www1.eere.energy.gov/buildings/windowsvolumepurchase/
Storm Windows Storm windows or doors that or Doors meet most recent Energy Star specifications (good), or
comply with Department of Energy Low-E volume Purchase Program (better - more efficient)
Heating System Heating system replacement that meets most recent Energy Star specifications. Gas/Propane/Oil Boiler / Furnace Air Conditioner Air-source air conditioner or air-source heat pump replacement with a new unit that meets most recent Energy
Star specifications. Geothermal Heating or cooling system replacement with an Energy Star qualified geothermal heat pump that meets Tier 2
efficiency requirements and that is installed in accordance with ANSI/ACCA Standard 5 QI-2007.
Water Heater Replacement of a natural gas, propane, or electric water heater
(gas, propane, electric, tankless)
that meets most recent Energy Star specifications.
Water Heater (solar) Solar water heating property must be Energy Star Qualified, or certified by the Solar Rating and Certification Corporation or by comparable entity endorsed by the state in which the system is installed.
Fuel Cells and Microturbine Systems
Efficiency of at least 30% and must have a capacity of at least 0.5 kW.
Solar Panels (Photovoltaic Systems)
Photovoltaic systems must provide electricity for the residence, and must meet applicable fire and electrical code requirement.
Wind Turbine Residential
A wind turbine collects kinetic energy from the wind and converts it to electricity that is compatible with a home's electrical system, and
Has a nameplate capacity of no more than 100 kilowatts.
Roofs Metal & Asphalt
Metal or asphalt roofs that meet most recent Energy Star specifications
Eligible Improvements
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Additional Information
Patricia McBarron PowerSaver Program Manager Office of Single Family Program Development [email protected]
21 | Energy Efficiency and Renewable Energy eere.energy.gov
PowerSaver Loan Product Danielle Sass Byrnett Supervisor, Better Buildings Residential U.S. Department of Energy
Building Technologies Office
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Working Together to Expand Energy Efficiency in Existing Homes
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Better Buildings Neighborhood Program: Financing Stats
• www.betterbuildings.energy.gov/neighborhoods – 41 state & local recipients, $508 million from late 2010 through early 2014 – >70 programs testing program design, marketing, financing, workforce,
and evaluation strategies – >100,000 upgrades in 3½ year period
• Financing summary
– >12,400 single family residential loans = 16.6% of SF residential upgrades
– $126M portfolio across 25 states
– average loan >$10,200 vs. unfinanced upgrade average $6,500
– Customer minimum income: $25,000; median: $75,000; average: $85,880
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Program Financing Resources
Better Buildings Residential Program Solution Center – NEW website for curated lessons and
resources to help residential energy efficiency programs plan, implement, and evaluate better.
– Step-by-step guidance, tips for success, examples, templates, more
– Filtering, favorites, subscription capabilities
– See full demo at ACI, April 29th 7pm; become a beta user May 1, 2014
– Email: [email protected] for details and May / June demo webinar dates
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Commitment: Provide DOE with annual number of residential upgrades and information about their benefits.
Learn More & Join: www.betterbuildings.energy.gov/bbrn
Connects energy efficiency programs and partners to share best practices to increase the number of homes that are energy efficient.
Benefits: Tools, templates, & resources Regular peer exchange calls
(Marketing, Financing, Workforce, etc) Project Performance vs. Loan
Performance (5/22/14) Program Support from Socially
Responsible Investing (12/19/13) Lessons from On-bill Financing &
Repayment Programs (10/24/13)
Newsletter updates on trends Optional program
benchmarking Online community hosted on
Home Energy Pros Recognition in media, materials
Better Buildings Residential Network
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For More Information
• DOE programs and resources: http://energy.gov/eere/buildings/about-residential
• To learn more about PowerSaver, visit: – http://energy.gov/eere/buildings/powersaver-loans
• E-mail contact: [email protected] or
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Resources
• DOE Residential Buildings Team – Steve Dunn, Project Manager, Residential Buildings
[email protected] |tel. 720.989.5881 – Ely Jacobsohn, Program Manager, Home Performance with
ENERGY STAR [email protected] | tel. 202-287-1333
– Danielle Sass Byrnett, Supervisor, Better Buildings Residential [email protected] |tel. 202.287.1320
• NREL – Alex Dane, NREL (Project Lead) [email protected] – Mike Elchinger, NREL [email protected]
• Technical Support Subcontractor
– Mathew Brown, Harcourt Brown & Carey – Andrew Isaacs and Ely Jacobson, SRA International
29 | Energy Efficiency and Renewable Energy eere.energy.gov
PowerSaver Loan Product JOAN GLICKMAN HOME ENERGY SCORE U.S. Department of Energy
Building Technologies Office
Insert
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Accomplishments & Ongoing Efforts
30+ Partners – About half are actively scoring homes
10,400+ homes scored since Summer 2012
194 Qualified Assessors
CT, MO, VT, NH, RI, OR, and other states interested in statewide adoption
– Growing number of local laws require disclosure of energy rating or data at point of sale
Individuals who take DOE’s free Qualified Assessor Training and pass the test can now receive 2 BPI CEUs
Outreach to our Partners
– Monthly Partner Webinar – Periodic Qualified Assessor calls – Account Manager support – Partner Portal on website – Significant improvements to Scoring Tool and scoring
methodology
Home Energy Score Web Counter
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Home Energy Score + PowerSaver = More EE Investments
first step to motivate homeowners to invest in EE
close the deal with affordable financing
PowerSaver
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Home Energy Score Integration with PowerSaver
• Great opportunity to connect homeowners, assessors and contractors to funding
• DOE encourages Home Energy Score Partners to consider working with a PowerSaver lender
• Technical assistance available to help Home Energy Score Partners work with lenders to design a tailored loan program for your local market
• Home Energy Score Qualified Assessors can be used to verify EE improvement jobs financed through PowerSaver – PowerSaver lenders will pay for the verification
www.HomeEnergyScore.gov [email protected]
33 | Energy Efficiency and Renewable Energy eere.energy.gov
PowerSaver Loan Product MATTHEW H. BROWN
Harcourt, Brown & Carey
Market Positioning and Product Details
Building Technologies Office
o Here
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What is the Value of Financing to EE/RE?
• Financing: – Gives access to EERE upgrades for people who do not have (or do
not want to use) cash. – Enables larger and deeper EERE retrofits than happen in absence of
financing. • DOE-sponsored finance programs show that average non financed
projects are $6,500 vs. $10,200 for financed projects.
• But availability of financing alone is not enough. Financing programs need three major elements (the three C’s): – Confidence: PowerSaver has insurance from HUD – Capital: PowerSaver has Fannie Mae + $millions of other capital
committed to it – Convenience: PowerSaver is set up and ready to go with
committed lenders and capital
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How does one use financing to stimulate EE upgrades?
• Catch people when they are already in motion. They might be: – Buying a home – Refinancing a home – Upgrading or remodeling their home (with efficiency, solar, new
kitchen, new roof) – Replacing failed equipment
• PowerSaver loan products can help people to pay for any of these four activities.
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The two major loan types are:
Unsecured Loans • Revolving • Closed End
Secured Loans • Purchase • Refinance
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How does one use financing to stimulate EE upgrades?
Secured Loans
Unsecured Loans
Replace Failed Equipment
Home Upgrades
Home Re-Fi Home Purchase
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How does one use financing to stimulate EE upgrades?
PowerSaver Fills Both
Needs
Secured Loans
Unsecured Loans
Replace Failed Equipment
Home Upgrades
Home Re-Fi Home Purchase
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How Can You Use PowerSaver?
If you already have a finance program then your program probably focuses
here.
Secured Loans
Unsecured Loans
Replace Failed Equipment
Home Upgrades
Home Re-Fi Home Purchase
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How Can You Use PowerSaver? [Your Programs does have financing partners in place]
In which case:
You should use PowerSaver to
capture people who are in motion here
Secured Loans
Unsecured Loans
Replace Failed Equipment
Home Upgrades
Home Re-Fi Home Purchase
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How Can You Use PowerSaver? [Your program does not have financing today]
In which case:
PowerSaver could meet all
your needs
Secured Loans
Unsecured Loans
Replace Failed Equipment
Home Upgrades
Home Re-Fi Home Purchase
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PowerSaver Loan Terms: Title 1 (Secured & Unsecured)
Basics • A home improvement loan backed with federal loan
insurance. Historically, Title 1 was used for any home improvement; PowerSaver is now specific to EERE.
• Underwriting is somewhat more inclusive than a typical home equity loan, for many borrowers.
What are the terms? • Unsecured: Up to $7,500; closes in hours to days • Secured, up to $25,000; closes in 3 weeks • Up to 15 year term (20 years for renewables) • Eligible improvements: HUD approved energy
improvements: HVAC, solar, envelope, lighting, etc. (and up to 25% can be non-energy related measures)
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PowerSaver Loan: PowerSaver Home Renovation Mortgage (203k)
Basics • The only home renovation mortgage backed by the U.S.
government • Can be used to buy and renovate OR refinance and
renovate, a home
What are the terms? • Loan limits from $217,500 to $625,000 in high cost areas
(limits vary by county); closes in 3-5 weeks • Up to 30 year term • Eligible improvements: To qualify for this loan at least
$3,500 must be used to fund energy improvements
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Can the PowerSaver help your program implement more energy efficiency?
• HUD selected a small number of lenders to pilot PowerSaver
• The lenders have grant funds that they will use to: – Market the product – Reduce or eliminate closing costs & other fees, which has the effect
of reducing the interest rate • Program partners may use their funds to buy down interest rates
• The lenders were chosen in part because they may have expertise running contractor-centric programs
• The lenders will offer financing programs that align with your program.
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A Few Items to be Aware of for PowerSaver
• Like any loan product, PowerSaver lenders make decisions on applications based on a review of credit including, among other items, a FICO score.
• Borrowers are required to provide a verification of their income prior to a loan closing.
• Interest rates are based on what private investors are willing to offer, taking in to account the HUD insurance. They are lower than they would be in absence of insurance.
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Some Tips for Success and Action Items
• Your program can: – Use funds to buy down interest rates – Integrate PowerSaver financing into program offerings, especially
contractor education and outreach. – Identify how PowerSaver offerings fit in with your goals, and
understand how PowerSaver complements your existing program offerings. (e.g. Other finance offerings in your area).
– Understand what role financing can play in your specific market.
47 | Energy Efficiency and Renewable Energy eere.energy.gov
Incorporating PowerSaver into HPwES and other Programs
JASON BOGOVICH and ANDREW ISAACS
SRA International
Building Technologies Office
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Financing
Credit Enhancements/ Financing Buy Downs
51%
21%
12% 2%
14%
49%
None Interest-rate buy down
Loan-loss reserve Program loan insurance
Revolving loan fund
16 HPwES Sponsors reported completing 17,000 projects using financing in 2013.
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4 3
02468
101214
Lowinterest
financing
On-billfinancing
Both
# H
PwEs
Spo
nsor
s
Homeowner Incentives
N = 19 N = 48
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Value Proposition For Program Sponsors
Access to low cost, long term fixed rate
financing
PowerSaver can be a suite of products or
can fill a product gap
Tangible finance product that your
program can provide to contractors
Increased closing rates meaning more
HPwES units
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Value Proposition For Program Sponsors
• Product can be easily added to existing programs
• PowerSaver can be customized to complement your
program design
• Sponsor or utilities can provide additional rate buy-
downs
• PowerSaver can complement and/or integrate with
utility rebates when available
• Leverage for your program by using outside capital
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Value Proposition For Contractors
Low Monthly Payments Helps Closing Rates
Rates 50% or more lower monthly payments then 36 month same as
cash financing options.
Can help consumers afford more EE and higher quality equipment
Can help quote lower monthly payments than competitors who do
not offer HP Financing helping closing rates
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Value Proposition For Contractors
No cost to contractor to offer financing
No financing cost to pass on to consumer
Contractor can Save 5% - 10% -vs- other
unsecured financing provider’s products
Example: $5 Million annual financed
= $250,000 or $500,000 savings to contractor
Long term fixed rates – no 36 month due to be paid by customers
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Value Proposition PowerSaver - Consumer
Long term fixed rate financing
Low monthly payments
No prepayment penalty
No hefty rate adjustment if loan
balance is not paid in 36 months
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Value Proposition PowerSaver - Consumer
Certified contractor base
Grant funds available through PowerSaver
lenders to help cover loan fees (closing costs,
appraisals, other fees)
Can be one-stop shopping when integrated
with utility rebate programs
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PowerSaver Job Types and Product Design
Job Types Whole-House Jobs Single-Measure - Prescriptive Path Renovations
Loan Types Unsecured Loans – PowerSaver – Reactive Customers
Up to 7 years or longer if sponsor provides capital
Secured Loans – PowerSaver – Proactive Customers Up to15-20 year secured loan rate: 6.99% or lower if sponsor provides rate buy-down $25,000 25% of loan available for non-energy efficient measures
203K – Acquisition Rehab or Re-finance Rehabilitation with Energy Efficient Measures
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PowerSaver -vs- Other Loan Options Monthly Payments
Loan Amount = $7,500 Estimated Monthly Payments by Financing Types: 36 Month Same as Cash Manufacturer Offered Financing = $208.33 10 Year PowerSaver @ 6.99% = $87.04 15 Year PowerSaver @ 6.99% = $67.37
Loan Amount = $10,000 Estimated Monthly Payments by Financing Types:
36 Month Same as Cash Manufacturer Offered Financing = $277.78 10 Year PowerSaver @ 6.99% = $116.06 15 Year PowerSaver @ 6.99% = 89.93
57 | Energy Efficiency and Renewable Energy eere.energy.gov
PowerSaver Loan Product
MIKE ELCHINGER NREL
PowerSaver Solar & Renewable Initiatives
National Renewable Energy Lab
Building Technologies Office
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PowerSaver and Residential RE
Eligible RE technologies • Solar PV • Solar thermal • Small wind • Geothermal • Fuel cells/micro-turbines
Residential PV opportunity Over the last 5 years: • 50% annual growth rate in installed residential
capacity • 40% reduction in installed costs
An attractive alternative For customers looking to solar, this is another attractive financing option – especially for: • Direct ownership (purists) • FICO scores < 700 • Interest rate deductibility • Lower rate due to federal insurance
Bundle PV with EE investments to lower overall costs
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PowerSaver and Residential RE (Cont’d)
Unsecured Title 1 203(k)
Market Opportunity
• Financing small-scale RE on a standalone basis
• Financing RE on a standalone basis
• Finance RE as part of a home purchase/re-fi
Advantages • Small PV: • ITC • Ownership
• Pre-paid PV lease: • Performance
guarantee • Lower system cost
• ITC • Mortgage Interest tax
deductibility • Ownership
• ITC • Mortgage Interest tax
deductibility • Ownership • Streamlined process • Higher loan amount
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QUESTIONS?
PRESENTERS: 1. Steve Dunn, DOE 2. Michael Freedberg, HUD 3. Danielle Sass Byrnett, DOE 4. Joan Glickman, DOE 5. Matthew Brown, Harcourt Brown & Carey 6. Andrew Isaacs, SRA International 7. Jason Bogovich, SRA International 8. Mike Elchinger, NREL
DOE PowerSaver Website: http://energy.gov/eere/buildings/powersaver-loans